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Tvl Karpage Industries v. The State Of Tamil Nadu

Tvl Karpage Industries v. The State Of Tamil Nadu

(Income Tax Appellate Tribunal, Madras)

Tribunal Appeal Nos. 1161 and 1136 of 1975 | 03-04-1976

S. CHOCKALINGAM, ADDL. J.M.:

1. In both the appeals appellant is the same. ITA 1161/75 is preferred regarding the re-assessment under s. 16 of the Tamil Nadue Genral Sales-tax Act, 1959, which lead to the impugned addition to the turnover for the year 1969-70.

2. T.A. 1136/75 concerns about the addition made in the course of re-assessment under s. 16 of the Tamil Nadu General Sales-tax Act, 1959, regarding the turnover for the year 1970-71.

3. The Appellant industries reported a total and taxable turnover of Rs. 12,600 for the year 1969-70 to the AAC, Moore Market Division, and he rejected the accounts and determined the taxable turnover at Rs. 18,900 by exercising best of judgment and the appellant has become final.

4. For the year 1970-71, the appellant’s turnover was determined at Rs. 41,250 as against the reported turnover of Rs. 27,500, by the same AAC, Moore Market Division. Subsequently re-assessment of the turnover of both the years was made on the footing of recovery of certificates, filed by appellant before the authorities, in charge of allotment of iron and steel purporting to have used more of iron and steel in business, than the quantity referred to in the books of accounts for the year 1969-70 and 1970-71.

5. The appellant was asked to produce the accounts in support of the averment in certificate that the appellant required 72,823 kgs. The consumption certificate indicated that the appellant’s consumption in iron and steel was of the value of Rs. 1,45,645, for the year 1969-70. Basing an that re-assessment was made an the additional turnover of Rs. 1,26,745 after deducting Rs. 18,900 already determined. The appellant did not file the objections before the Assessing Officer for the proposal and the turnover was determined as proposed.

6. When the matter was taken in appeal to the AAC (CT III, Madras City, he sustained the addition of an equal amount, which doubled the determined turnover of Rs. 18,900. The correctness of the addition is questioned in this Appeal T.A. 1161/75.

7. The same extract taken by the Intelligence Wing revealed that the appellant’s consumption of iron and steel was in the order of 1,04,591 kgs., for the year 1970-71, which was valued at Rs. 2,09,182 after deducting the turnover determined earlier an addition of Rs. 1,67,932 was proposed and then confirmed.

8. The matter was taken in appeal to the AAC(CT) III, Madras City and he sustained an addition of Rs. 28,850 and determined the turnover at Rs/ 70,100.

9. In both the appeals, it was argued by the Authorised Representative that there is no basic reason for re-assessment and further the addition is not based on acceptable data, but built upon unsafe assumption. The allotment for which application was made, was not considered by the Small Industries Development Corporation and the certificate should not have been relied on by the Commercial Taxes Department, in toto, for inferring suppression or omissions.

10. Point : Whether the addition made to the turnover already determined for the year 1969-70 and 1970-71 are valid and sustainable

11. For the year 1969-70, the appellant reported a taxable turnover of Rs. 12,600. After pre-assessment notice and in the absence of valid objections, the taxable turnover was determined at Rs. 18,900, by the AAC, by exercising best of judgment was warranted on the occasion. For the subsequent year also by exercising best of judgment as warranted on the occasion. For the subsequent year also by exercising best of Judgment the taxable turnover was determined at Rs. 41,250, as against the reported turnover of Rs. 27,500.

12. The re-assessment is stated to have been necessitated by discovery or auditor’s certificate filed by the appellant before the Small Industries Development Corporation. The application was made by the appellant for allotment of higher quantities of iron and steel for the purpose of business namely, manufacture of grills, etc. The Special Asstt. CTO (Int.) Group IV, made a report regarding the discovery to the Dy. CTO, Moore Market Division, stating that the appellant consumed about 72,823 kgs., of iron and steel for 1969-70 and 1,04,591 kgs. for 1970-71. The appellant was asked to produce the accounts, and they were not produced by the appellant. It was explained, that the appellant did not have accounts, which is evident for consumption of such high quantities of iron and steel. So the addition proposed on the basis of the report of the Intelligence Wing was adopted by the Dy. CTO, Moore Market Division for 1969-70 and 1970-71. The first and the foremost contention of the learned Authorised Representative is that absolute reliance should not have been placed on the certificate, filed before the Small Industries Development Corporation, as it was made purport by the appellant with a view to get larger quota for the benefit of the business and that the claim made by the appellant therein was not entirely true. As against this argument, the learned Additional State Representative In-charge contended that the appellant having made a statement before the authorities on a prior occasion cannot go back on it or resile from the sand and that the averment made in the certificate is absolutely binding. Making out of such a certificate in the interest of the business was admitted by the appellant. According to the appellant it is too tall a claim that was made with a motive to get more quota. It amounts to saying that the certificate should not have been relied on by the officers of the Intelligence Wing, making out a case of suppression and omission of the turnover by the appellant. The re-assessment is not only permissible but necessary in case, for any reason the whole or any part of the turnover of the business of a dealer ha escaped assessment to tax, as required under s. 16(1)(a) of the TN GST Act, 1959. The appellant’s business for 1969-70 and 1970-71 was already assessed to tax, after exercising best of judgment by the authorities concerned. The facts regarding the suppression and the turnover is found of flow from the certificate filed by the appellant. The certificate was one which was given by the appellant to a third party, namely, Small Industries Development Corporation, Madras. There is nothing to show that the claim of the appellant as having consumed much quantity of iron an steel during those years, was supported by any other reliable data. There is absolutely nothing to show that the appellant consumed 72,823 kgs. in 1969-70 or 1,04,591 kgs. in 1970-71.

13. No other extraneous documents in the shape of anamath accounts or slips or credit notes or any document which is secret in nature, which would reasonably throw a cloud around the business transactions of the appellant was seized or came into the possession of the Department in the course of any independent investigation or verification of the claim of the appellant as found in the certificate. To accept the statement of the appellant as found in the certificate as Gospel truth or as an unassailable piece of material with emphatic evidenting value would be too much. To state that the certificate on its face value, without a thorough investigation or a verification or appraisal or an investigation of a nature as prompted by the circumstances is too narrow an approach. A scrutiny of the certificate and an appreciation of the same or in other words a "verification" as it is usually called should be made, before relying on that for the purpose of making addition. In this context, the explanation of the appellant was that the motive to obtain more quota played a part in filing a certificate which was not quite true, cannot be summarily rejected as of no significance, though it might appear to be a way of rendering an escapist explanation. The explanation is probable especially when the appellant had to file a certificate before Small Industries Development Corporation to get higher quota. Such an explanation cannot be rejected or thrown over board as imaginary or untrustworthy, inasmuch as a motive of this type, cannot be taken as an element far far away to see.

14. The appellant did not produce accounts as called for by the Dy. CTO, in the course of re-assessment proceedings, as the stand of the appellant was that the appellant was not having accounts, to support the claim made in the certificate, regarding consumption of iron and steel. Naturally the failure to produce the accounts cannot be considered, as though the appellant is suppressing accounts which may throw light on his claim that during 1969-70 and 1970-71 consumption was in the order of 72,823 kgs, and 1,04,591 kgs. Thus it is clear that the more reliance placed on the only document, namely certificate furnished to the Small Industries Development Corporation, cannot be taken as a safe guide, to presume huge suppressions, warranting re-assessment proceedings.

15. So we find the point in favour of the appellant. In view of our finding on point, the appeals are liable to be allowed and accordingly T.A. 1161/75 and 1136/75 are allowed.

Advocate List

  • K. Thiruvenkatachari

  • M. Kuppusamy

Bench
  • P. Abboy, Addl. (D.M.)
  • S. Chockalingam, Addl. (J.M.)
Eq Citations
  • LQ
  • LQ//1976/86
Head Note

A. Sales Tax and VAT — Tamil Nadu General Sales Tax Act, 1959 (28 of 1959) — S. 16 — Re-assessment — Necessity of — Certificate furnished by appellant to Small Industries Development Corporation — Inference of huge suppressions — Impermissibility of — Appellant's business for 1969-70 and 1970-71 already assessed to tax, after exercising best of judgment by authorities concerned — Facts regarding suppression and turnover found to flow from certificate filed by appellant — Certificate was one which was given by appellant to a third party, namely, Small Industries Development Corporation, Madras — There is nothing to show that claim of appellant as having consumed much quantity of iron and steel during those years, was supported by any other reliable data — No other extraneous documents in the shape of anamath accounts or slips or credit notes or any document which is secret in nature, which would reasonably throw a cloud around business transactions of appellant was seized or came into possession of department in the course of any independent investigation or verification of claim of appellant as found in certificate — To accept statement of appellant as found in certificate as Gospel truth or as unassailable piece of material with emphatic evidenting value would be too much — More reliance placed on only document, namely certificate furnished to Small Industries Development Corporation, cannot be taken as a safe guide, to presume huge suppressions, warranting re-assessment proceedings — Appellant did not produce accounts as called for by Dy. CTO, in the course of re-assessment proceedings, as stand of appellant was that appellant was not having accounts, to support claim made in certificate, regarding consumption of iron and steel — Naturally failure to produce accounts cannot be considered, as though appellant is suppressing accounts which may throw light on his claim that during 1969-70 and 1970-71 consumption was in the order of 72,823 kgs, and 1,04,591 kgs — More reliance placed on only document, namely certificate furnished to Small Industries Development Corporation, cannot be taken as a safe guide, to presume huge suppressions, warranting re-assessment proceedings — Re-assessments set aside — T.N. General Sales Tax Act, 1959 (28 of 1959), S. 16 (Paras 12, 13 and 15)